<PAGE>
Filed pursuant to Rule 424(b)(2)
SEC File No. 333-59183
Prospectus Supplement to Prospectus dated July 24, 1998.
$150,000,000
DILLARD'S, INC.
5.790% Notes due November 15, 2001
---------------
Dillard's, Inc. will pay interest on the Notes on May 15 and November 15 of
each year. The first such payment will be made on May 15, 1999. The Notes will
be issued only in denominations of $1,000 and integral multiples of $1,000.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
<TABLE>
<CAPTION>
Per Note Total
-------- -----
<S> <C> <C>
Initial public offering price............................. 100.000% $150,000,000
Underwriting discount..................................... 0.400% $600,000
Proceeds, before expenses, to Dillard's, Inc. ............ 99.600% $149,400,000
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Notes will accrue from November 4, 1998 and
must be paid by the purchaser if the Notes are delivered after November 4,
1998.
---------------
The underwriter expects to deliver the Notes in book-entry form only through
the facilities of The Depository Trust Company against payment in New York,
New York on November 4, 1998.
GOLDMAN, SACHS & CO.
---------------
Prospectus Supplement dated October 29, 1998.
<PAGE>
USE OF PROCEEDS
DESCRIPTION OF THE NOTES
The Company will use the net proceeds from the sale of the notes offered
hereby (the "Notes") (after deduction of underwriting discounts and commissions
and expenses payable by the Company) to reduce commercial paper indebtedness.
The Company used the proceeds from the sale of the commercial paper for working
capital.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for the
Company for each of the years in the five year period ended January 31, 1998
and for the six months ended August 1, 1998 and August 2, 1997. For purposes of
computing the ratio, earnings consist of earnings before income taxes plus
fixed charges (less capitalized interest), and fixed charges consist of
interest expense, capitalized interest and the interest portion of rent expense
which is approximated at one-third of rent expense.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
---------------------------------------------------------------------------------
AUGUST 1, AUGUST 2, JANUARY 31, FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29,
1998 1997 1998 1997 1996* 1995 1994
--------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
3.25 3.21 3.69 3.61 2.86 3.72 3.57
</TABLE>
--------
*53 weeks.
GENERAL
The Notes will be issued under an Indenture dated May 15, 1988, as
supplemented, between the Company and The Chase Manhattan Bank (formerly known
as Chemical Bank), as trustee. Provisions of the Indenture are more fully
described under the heading "Description of Debt Securities" in the
accompanying prospectus.
The Notes will mature on November 15, 2001. Interest on the Notes will accrue
from November 4, 1998 and will be payable semiannually, on each May 15 and
November 15, beginning May 15, 1999, to the persons in whose names the Notes
are registered at the close of business on May 1 or November 1 before the
payment date at the annual rate of 5.790%.
The Company will issue the Notes only in book-entry form through the
facilities of The Depository Trust Company, as depositary (the "Global Notes").
The Notes will be in denominations of $1,000 and integral multiples thereof.
Transfers or exchanges of beneficial interests in Global Notes in book-entry
form may be effected only through a participating member of the depositary. See
"Global Notes." As described in the accompanying prospectus, under certain
circumstances Notes may be issued in certificated form in exchange for the
Global Notes. In the event that Notes are issued in certificated form, they may
be transferred or exchanged at the offices described in the immediately
following paragraph.
Payments on the Global Notes will be made to the depositary. If the Notes are
issued in certificated form, the Company will pay any principal and interest to
the office of The Chase Manhattan Bank, as trustee, in the City of New York.
Notes issued in certificated form will be registrable at the office of the
Trustee, and the Notes will be exchangeable for Notes having identical terms
and provisions at the same office. The Company will maintain the option,
however, of paying interest on Notes issued in certificated form by check
mailed to the address of the person entitled to such interest as shown on the
securities register.
The Notes cannot be redeemed prior to maturity and there is no sinking fund
for the Notes.
By board resolution the Company has established that the defeasance
provisions
S-2
<PAGE>
described under the heading "Defeasance of Offered Debt Securities or Certain
Covenants in Certain Circumstances" and the event of default described in
subparagraph (e) under the heading "Events of Default" in the accompanying
prospectus will be applicable to the Notes.
GLOBAL NOTES
The Notes will be issued in whole or in part in the form of one or more
Global Notes. The Global Notes will be deposited with, or on behalf of the
depositary, and registered in the name of a nominee of the depositary. Except
under the limited circumstances described in the accompanying prospectus under
the heading "Description of Debt Securities--Global Notes," owners of
beneficial interests in Global Notes will not be entitled to physical delivery
of Notes in certificated form. Global Notes may not be transferred except as a
whole by the depositary to a nominee of the depositary. Global Notes may also
be transferred by a nominee of the depositary to the depositary or another
nominee of the depositary. The depositary or any nominee may transfer Global
Notes to a successor of the depositary or a nominee of such successor.
The depositary has advised the Company and the underwriter as follows: The
depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. The depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movements of securities certificates. The
depositary's participants include securities brokers and dealers (including the
underwriter), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the depositary.
Access to the depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by the
depositary only through participants.
The depositary has further advised the Company that the depositary's
management is aware that some computer applications, systems, and the like for
processing data that are dependent upon calendar dates, including dates before,
on, and after January 1, 2000, may encounter "Year 2000 problems." The
depositary has informed its participants and other members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and interest payments) to security holders, book-entry deliveries,
and settlement of trades within the depositary, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, the depositary's plan includes a
testing phase, which is expected to be completed within appropriate time
frames.
However, the depositary's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom the depositary licenses
software and hardware, and third party vendors on whom the depositary relies
for information or the provision of services, including telecommunication and
electrical utility service providers, among others. The depositary has informed
its participants and other members of the financial community that it is
contacting (and will continue to contact) third party vendors from whom the
depositary acquires services to: (i) impress upon them the importance of such
services being Year 2000 compliant; and (ii) determine the extent of their
efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, the depositary is in the process of developing such
contingency plans as it deems appropriate.
S-3
<PAGE>
According to the depositary, the foregoing information with respect to the
depositary has been provided to its participants and other members of the
financial community for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
UNDERWRITING
The Company and Goldman, Sachs & Co. ("Goldman Sachs") have entered into an
underwriting agreement and a terms agreement with respect to the Notes. Subject
to certain conditions Goldman Sachs has agreed to purchase all of the Notes.
Notes sold by Goldman Sachs to the public will initially be offered at the
initial public offering price set forth on the cover of this Prospectus
Supplement. Any Notes sold by the Underwriter to securities dealers may be sold
at a discount from the initial public offering price of up to 0.200% of the
principal amount of the Notes. Any such securities dealers may resell any Notes
purchased from the Underwriter to certain other brokers or dealers at a
discount from the initial public offering price of up to 0.150% of the
principal amount of the Notes. If all the Notes are not sold at the initial
offering price, Goldman Sachs may change the offering price and the other
selling terms.
The Notes are a new issue of securities with no established trading market.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by Goldman Sachs that Goldman Sachs
intends to make a market in the Notes. Goldman Sachs is not obligated to do so,
however, and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Notes.
In connection with the offering of the Notes, Goldman Sachs may purchase and
sell Notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriter of a greater number of
Notes than it is required to purchase in the offering. Stabilizing transactions
consist of certain bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the Notes while the offering is in
progress.
Goldman Sachs also may impose a penalty bid. This occurs when a particular
Underwriter repays to the Underwriters a portion of the underwriting discount
received by it because the representatives have repurchased Notes sold by or
for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by Goldman Sachs may stabilize, maintain or otherwise affect
the market price of the Notes. As a result, the price of the Notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by Goldman Sachs at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
The Company estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$100,000. Goldman Sachs has agreed to reimburse certain of these expenses in
the amount of $75,000.
The Company has agreed to indemnify Goldman Sachs against certain
liabilities, including liabilities under the Securities Act of 1933.
S-4
<PAGE>
$2,500,000,000
DILLARD'S, INC.
DEBT SECURITIES
EQUITY SECURITIES
DILLARD'S CAPITAL TRUST I
DILLARD'S CAPITAL TRUST II
DILLARD'S CAPITAL TRUST III
DILLARD'S CAPITAL TRUST IV
DILLARD'S CAPITAL TRUST V
CAPITAL SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED,
TO THE EXTENT DESCRIBED HEREIN, BY
DILLARD'S, INC.
Dillard's, Inc. (the "Company"), may offer and issue from time to time,
together or separately, (i) its debt securities ("Debt Securities") in one or
more series, (ii) shares of its Class A Common Stock, par value $.01 per share
("Class A Common Stock") and (iii) shares of its Additional Preferred Stock,
par value $.01 per share ("Preferred Stock" and, together with the Class A
Common Stock, "Equity Securities"), with such terms as are described herein
and in the applicable Prospectus Supplement.
Dillard's Capital Trust I, Dillard's Capital Trust II, Dillard's Capital
Trust III, Dillard's Capital Trust IV and Dillard's Capital Trust V, each a
trust created under the laws of the State of Delaware (each an "Issuer Trust,"
and collectively, the "Issuer Trusts"), may severally offer and issue from
time to time equity securities (the "Capital Securities") representing
preferred beneficial ownership interests in such Issuer Trust with such terms
as are described herein and in the applicable Prospectus Supplement. The
Company will be the owner, directly or indirectly, of the common securities
(the "Common Securities" and, together with the Capital Securities, the "Trust
Securities") representing common beneficial ownership interests in each Issuer
Trust. Payment to holders of Capital Securities of cash distributions thereon
("Distributions"), and amounts payable upon redemption thereof, liquidation of
the applicable Issuer Trust or otherwise, will be guaranteed by the Company to
the extent described herein and in the applicable Prospectus Supplement (each,
a "Guarantee"). The only assets of an Issuer Trust will be Debt Securities
purchased from the Company with the proceeds from the issuance of its Trust
Securities. Each Guarantee will rank pari passu with the Debt Securities
purchased with the proceeds of the Capital Securities covered by such
Guarantee. If specified in the applicable Prospectus Supplement, such Debt
Securities may be distributed pro rata to holders of Trust Securities at such
times as may be described herein or in such Prospectus Supplement.
The Debt Securities, Equity Securities, Capital Securities and Guarantees
are sometimes herein referred to individually as a "Security" and collectively
as the "Securities." This Prospectus may not be used to consummate sales of
Securities unless accompanied by a Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
Securities may be offered through dealers, underwriters or agents designated
from time to time, as set forth in the accompanying Prospectus Supplement. Net
proceeds to the Company will be the purchase price in the case of sales to a
dealer, the public offering price less discount in the case of sales to an
underwriter or the
(continued on next page)
<PAGE>
(continued from previous page)
purchase price less commission in the case of sales through an agent--in each
case, less other expenses attributable to issuance and distribution. See "Plan
of Distribution" for possible indemnification arrangements for dealers,
underwriters and agents.
The aggregate initial public offering price of all Equity Securities, Debt
Securities (other than Debt Securities purchased by Issuer Trusts) and Capital
Securities issued pursuant to the Registration Statement of which this
Prospectus forms a part shall not exceed $2,500,000,000 or the equivalent
thereof in any foreign currency or composite currency. Unless specified in the
applicable Prospectus Supplement, the Debt Securities and the Capital
Securities will be issued in registered form without coupons.
Certain specific terms of the Securities in respect of which this Prospectus
is being delivered will be described in the accompanying Prospectus
Supplement, including without limitation and where applicable, (a) in the case
of the Debt Securities, series designation, ranking, aggregate principal
amount, denominations, maturity date (including any provisions for the
shortening or extension thereof), interest payment dates, interest rate (which
may be fixed or variable) or method of calculating interest, if any, interest
deferral terms, if any, place or places where and currency or currency units
in which principal, premium, if any, and interest, if any, will be payable,
any terms of redemption, any sinking fund provisions, terms for any conversion
or exchange into Class A Common Stock or other securities, initial offering or
purchase price, methods of distribution and any other special terms, and (b)
in the case of Capital Securities, the identity of the Issuer Trust, title,
aggregate stated liquidation amount, number of securities, Distribution rate
or method of calculating such rate, Distribution payment dates, applicable
Distribution deferral terms, if any, place or places where and currency or
currency units in which Distributions and other amounts will be payable, any
terms of redemption, exchange, initial offering or purchase price, methods of
distribution and any other special terms, and (c) in the case of Preferred
Stock, the specific title and stated value, any dividend, liquidation,
redemption, voting and other rights, any terms for conversion into Class A
Common Stock, the initial offering or purchase price, methods of distribution
and any other special terms.
The applicable Prospectus Supplement also will contain information, as
applicable, about certain United States federal income tax consequences
relating to the Securities and will set forth the name of and compensation to
each dealer, underwriter or agent (if any) involved in the sale of the
Securities being offered and the managing underwriters with respect to any
Securities sold to or through underwriters.
No dealer, salesperson or other person has been authorized in connection
with any offering made hereby to give any information or to make any
representations not contained or incorporated by reference in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or any underwriter agent or
dealer. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any security other than the Securities offered hereby, nor
does it constitute an offer to sell or a solicitation of an offer to buy the
Securities to any person in any jurisdiction in which it is unlawful to make
such offer or solicitation to such person. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any
date subsequent to the date hereof or that there has been no change in the
affairs of the Company since the date hereof.
----------------
The date of this Prospectus is July 24, 1998.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and at Seven World Trade Center, Suite 1300, New
York, New York 10048, and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Additionally, such material may
be accessed at the Commission's Website (http:/www.sec.gov). Such material can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 on which certain of the Company's securities
are listed.
This Prospectus constitutes a part of a Registration Statement filed by the
Company and the Issuer Trusts with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement in accordance with the
rules and regulations of the Commission. Reference is hereby made to the
Registration Statement and to the related exhibits for further information
with respect to the Company, the Issuer Trusts and the Securities. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such
reference.
No separate financial statements of any Issuer Trust have been included
herein. The Company and the Issuer Trusts do not consider that such financial
statements would be material to holders of the Capital Securities because each
Issuer Trust is a newly formed special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose
to engage in any activity other than holding Debt Securities as trust assets
and issuing the Trust Securities. See "The Issuer Trusts," "Description of
Capital Securities," "Description of Debt Securities" and "Description of
Guarantees." In addition, the Company does not expect that any of the Issuer
Trusts will be filing reports under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission under the Exchange Act by
the Company are incorporated herein by reference:
(a) Annual Report on Form 10K for the fiscal year ended January 31, 1998;
(b) Quarterly Report on Form 10-Q for the quarter ended May 2, 1998;
(c) Current Reports on Form 8-K dated February 19, 1998 and May 16, 1998;
and
(d) Description of the Company's Class A Common Stock contained in its
Registration Statement on Form 8-A, dated June 7, 1989.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
3
<PAGE>
Copies of the above documents (excluding exhibits) may be obtained upon
request without charge from the Company, 1600 Cantrell Road, Little Rock,
Arkansas 72201, Attention: James I. Freeman (telephone number 501-376-5200).
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including any documents that are incorporated by reference
as set forth in "Incorporation of Certain Documents by Reference," contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such statements are indicated by
words or phrases such as "anticipates," "estimates," "projects," "management
believes," "the Company believes" and similar words or phrases. Such
statements involve risks and uncertainties and are subject to change based on
various important factors. The following factors, among others, could affect
the Company's financial performance and could cause actual results to differ
materially from those expressed or implied in any such forward-looking
statements: economic and weather conditions in the regions in which the
Company's stores are located and their effect on the buying patterns of the
Company's customers, changes in consumer spending patterns and debt levels,
trends in personal bankruptcies and the impact of competitive market forces.
4
<PAGE>
THE COMPANY
Dillard's, Inc. is a regional group of traditional department stores
operating, as of January 31, 1998, 270 stores in Alabama, Arizona, Arkansas,
California, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Mississippi, Missouri, Nebraska, Nevada, New Mexico,
North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Virginia,
Utah and Wyoming. The stores vary from 30,000 square feet to 409,000 square
feet in size, with the area of typical stores ranging between 80,000 to
220,000 square feet, and the average store size being approximately 160,000
square feet. The stores are owned either by the Company or a wholly owned
subsidiary, with the exception of 66 stores, which are leased from third
parties. The stores feature branded and private label goods in the middle to
upper-middle price ranges and cater to a broad spectrum of the population.
Most of the stores are full-line department stores and sell quality name-brand
and private label apparel and accessories for men, women and children, as well
as accessories for the home such as linens and domestics, china, silverware,
draperies and housewares. Special emphasis is placed on fashion-oriented
apparel.
The Company is incorporated under the laws of the State of Delaware. The
executive offices of the Company are located at 1600 Cantrell Road, Little
Rock, Arkansas 72201, telephone number: 501-376-5200.
RECENT DEVELOPMENT
The Company has entered into an Agreement and Plan of Merger, dated as of
May 16, 1998 (the "Merger Agreement"), providing for the acquisition of the
stock of Mercantile Stores Company, Inc. ("Mercantile"). Mercantile is a
conventional department store retailer engaged in the general merchandising
business. Mercantile operates 103 department stores and 16 home fashion stores
under 13 different names in a total of 17 states. A subsidiary, Mercantile
Credit Corp., provides servicing for Mercantile's private label credit
program.
MSC Acquisitions, Inc., a Delaware corporation ("NEWCO") and a newly formed
wholly owned subsidiary of the Company, has offered to purchase all of the
outstanding shares of Common Stock, par value $.14 2/3 per share (the
"Shares"), of Mercantile at a purchase price of $80 per Share, net to the
seller in cash without interest thereon.
The Merger Agreement provides that, following the completion of the offer,
NEWCO will be merged with and into Mercantile (the "Acquisition"). Following
the Acquisition, Mercantile will continue as the surviving corporation and
become a direct, wholly owned subsidiary of the Company.
Stockholders of Mercantile representing approximately 40% of the issued and
outstanding Shares have contractually agreed, among other things, to tender
their Shares in the offer, provide the Company with an irrevocable proxy,
grant an option at the $80 offer price and otherwise support the transaction
with the Company.
The offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration date for the offer
a number of Shares which, together with any Shares owned, directly or
indirectly, by the Company or NEWCO, constitutes more than 50% of the voting
power (determined on a fully-diluted basis), on the date of purchase, of all
the securities entitled to vote generally in the election of directors or in a
merger (the "Minimum Condition"). If the Company purchases not less than that
number of Shares needed to satisfy the Minimum Condition, it will be able to
effect the Acquisition without the affirmative vote of any other stockholder
of Mercantile.
Under the Merger Agreement, the respective obligations of the Company, NEWCO
and Mercantile under the Acquisition shall be subject to the satisfaction at
or prior to the effective time of the Acquisition of the following conditions
(a) as required by the Delaware General Corporation Law (the "DGCL"), the
Merger Agreement shall have been approved by the affirmative vote of the
stockholders of Mercantile by the requisite vote in accordance with
Mercantile's Certificate of Incorporation and the DGCL (which Mercantile has
represented shall be solely the affirmative vote of a majority of the
outstanding Shares); (b) no statute, rule,
5
<PAGE>
regulation, executive order, decree, ruling, injunction or other order
(whether temporary, preliminary or permanent) shall have been enacted,
entered, promulgated or enforced by any United States, foreign, federal or
state court or governmental authority which prohibits, restrains, enjoins or
restricts the consummation of the Acquisition; (c) NEWCO shall have purchased
Shares pursuant to the offer and (d) any waiting period applicable to the
Acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), shall have been terminated or expired.
The Company believes that the Acquisition is highly probable although there
can be no assurance that the Acquisition will be completed.
The Company issued a press release on June 4, 1998, announcing the receipt
of a request by the Federal Trade Commission (the "FTC") for additional
information in connection with the Company's HSR Act filing. As a result of
the request by the FTC, NEWCO extended the period during which its tender
offer for Shares will remain open to 12:00 Midnight, New York City Time, on
Wednesday, August 5, 1998.
THE ISSUER TRUSTS
Each Issuer Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary
of State on July 14, 1998. Each Issuer Trust will be governed by an amended
and restated trust agreement (each, a "Trust Agreement") among the Company, as
Depositor, Chase Manhattan Bank Delaware, as Delaware Trustee, The Chase
Manhattan Bank, as Property Trustee (together with the Delaware Trustee, the
"Issuer Trustees") and two individuals selected by the holders of the Common
Securities to act as administrators with respect to such Issuer Trust (the
"Administrators") and the holders, from time to time, of the Trust Securities.
The Company, as the holder of the Common Securities, intends to select two
individuals who are employees or officers of or affiliated with the Company to
serve as the Administrators. Each Issuer Trust exists for the exclusive
purposes of (i) issuing and selling its Trust Securities, (ii) using the
proceeds from the sale of such Trust Securities to invest in a series of Debt
Securities and (iii) engaging in only those other activities necessary,
convenient or incidental thereto (such as registering the transfer of Trust
Securities). Accordingly, Debt Securities will be the sole assets of each
Issuer Trust, and payments under the Debt Securities owned by an Issuer Trust
will be the sole revenue of such Issuer Trust.
All of the Common Securities of each Issuer Trust will be owned directly or
indirectly by the Company. The Common Securities of an Issuer Trust will rank
pari passu, and payments will be made thereon pro rata, with the Capital
Securities of such Issuer Trust, except that upon the occurrence and
continuance of a Debenture Event of Default (as defined herein) arising as a
result of any failure by the Company to pay any amounts in respect of the Debt
Securities owned by such Issuer Trust when due, the rights of the Company as
holder of the Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Capital Securities of such Issuer Trust. See
"Description of Capital Securities--Subordination of Common Securities."
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will acquire, directly or indirectly, Common Securities in an
aggregate liquidation amount equal to at least 3% of the total capital of each
Issuer Trust. Unless otherwise specified in the applicable Prospectus
Supplement, each Issuer Trust will have a term of approximately 40 years from
the date on which it initially issues its Capital Securities, but may dissolve
earlier as provided in the applicable Trust Agreement and described in the
applicable Prospectus Supplement. Unless otherwise specified in the applicable
Prospectus Supplement, the name and address of the Delaware Trustee for each
Issuer Trust will be Chase Manhattan Bank Delaware, 1201 Market Street,
Wilmington, Delaware 19801, and the name and address of the Property Trustee,
the Guarantee Trustee and the Debt Securities Trustee for each Issuer Trust
will be The Chase Manhattan Bank, 450 West 33rd Street, 15th Floor , New York,
New York 10001.
It is anticipated that no Issuer Trust will be subject to the reporting
requirements under the Exchange Act.
6
<PAGE>
USE OF PROCEEDS
The Issuer Trusts will use all proceeds from the sale of Trust Securities to
purchase Debt Securities from the Company. Unless otherwise set forth in the
applicable Prospectus Supplement, the Company intends to use the net proceeds
from the sale of its Equity Securities and/or Debt Securities (including Debt
Securities issued to the Issuer Trusts) for general corporate purposes, which
may include additions to working capital, financing of acquisitions, the
repurchase of outstanding Class A Common Stock and the repayment of
indebtedness or for such other purposes as are set forth in the applicable
Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for each of the years in the five year period ended January 31,
1998 and for the three months ended May 2, 1998 and May 3, 1997. For purposes
of computing the ratio, earnings consist of earnings before income taxes plus
fixed charges (less capitalized interest of preferred stock dividends), and
fixed charges consist of interest expense, capitalized interest and the
interest portion of rent expense which is approximated at one-third of rent
expense.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEAR ENDED
------------------ ------------------------------------------------------------
MAY 2, MAY 3, JAN. 31, FEB. 1, FEB. 3, JAN. 28, JAN. 29,
1998 1997 1998 1997 1996* 1995 1994
------ ------ -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
3.61 3.63 3.69 3.61 2.86 3.72 3.57
</TABLE>
--------
*53 weeks
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends for the Company for each of the years in
the five year period ended January 31, 1998 and for the three months ended May
2, 1998 and May 3, 1997. For purposes of computing the ratio, earnings consist
of earnings before income taxes plus fixed charges (less capitalized interest)
and preferred stock dividends, and fixed charges consist of interest expense,
capitalized interest and the interest portion of rent expense which is
approximated at one-third of rent expense.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEAR ENDED
------------------ ------------------------------------------------------------
MAY 2, MAY 3, JAN. 31, FEB. 1, FEB. 3, JAN. 28, JAN. 29,
1998 1997 1998 1997 1996* 1995 1994
------ ------ -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
3.61 3.62 3.69 3.61 2.86 3.72 3.57
</TABLE>
--------
*53 weeks
DESCRIPTION OF DEBT SECURITIES
The Debt Securities in respect of which this Prospectus is being delivered
(the "Offered Debt Securities") will constitute either senior or subordinated
debt of the Company and will be issued, in the case of Debt Securities that
will be senior debt, under an Indenture dated as of May 15, 1988, as
supplemented by a First Supplemental Indenture dated as of December 16, 1988,
a Second Supplemental Indenture dated as of September 14, 1990, and a Third
Supplemental Indenture to be entered into (the Indenture, as supplemented,
being referred to herein as the "Senior Debt Indenture") between the Company
and The Chase Manhattan Bank (formerly known as Chemical Bank), as Trustee,
and, in the case of Debt Securities that will be subordinated debt, under a
Subordinate Indenture to be entered into between the Company and The Chase
Manhattan Bank, as Trustee (the "Subordinated Debt Indenture"), copies of
which are fixed as exhibits to the Registration Statement. The Senior
7
<PAGE>
Debt Indenture and Subordinated Debt Indenture are sometimes hereinafter
referred to individually as an "Indenture" and collectively as the
"Indentures." The following summaries of certain provisions of the Indentures
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indentures, including the
definitions therein of certain terms. Whenever particular sections of, or
terms defined in, the Indentures are referred to, such sections or defined
terms are incorporated herein by reference.
GENERAL
The Debt Securities will be either unsecured senior or subordinated
obligations of the Company.
Neither Indenture limits the aggregate principal amount of the Debt
Securities or of any particular series of Offered Debt Securities and provides
that Debt Securities may be issued thereunder from time to time in one or more
series. All Debt Securities of any series need not be issued at the same time
or bear interest at the same rate or mature on the same date.
Reference is made to the Prospectus Supplement (the "Prospectus Supplement")
relating to the Offered Debt Securities for the following terms thereof: (1)
the title of the Offered Debt Securities; (2) classification as senior or
subordinated Debt Securities; (3) any limit on the aggregate principal amount
of the Offered Debt Securities; (4) the date or dates on which the Offered
Debt Securities will mature; (5) the rate or rates per annum (or the method of
calculating such rates) at which the Offered Debt Securities will bear
interest, if any, and the date from which such interest, if any, will accrue;
(6) the Interest Payment Dates on which any such interest on the Offered Debt
Securities will be payable, the Regular Record Date for any interest payable
on any Offered Debt Securities on any Interest Payment Date, any provisions
relating to the deferral of interest, and the extent to which, or the manner
in which, any interest payable on a global Debt Security (a "Global Note") on
an Interest Payment Date will be paid if other than in the manner described
under "Global Notes" below; (7) the dates, if any, on which and the price or
prices at which the Offered Debt Securities may, pursuant to any mandatory or
optional sinking fund provisions, be redeemed by the Company and other
detailed terms and provisions of any such sinking funds; (8) the date, if any,
after which and the price or prices at which the Offered Debt Securities may,
pursuant to any optional redemption provisions, be redeemed at the option of
the Company or of the holder thereof and other detailed terms and provisions
of any such optional redemption; (9) the right of the Company to defease the
Offered Debt Securities or certain covenants under the Indentures; (10) the
currency or currencies, which may be a composite currency such as the European
Currency Unit, of payment of principal of and premium, if any, and interest on
the Offered Debt Securities, if other than U.S. dollars; (11) whether the
Offered Securities are to be issued with original issue discount within the
meaning of Section 1273(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder; (12) whether the Offered
Securities are to be issued in whole or in part in the form of one or more
Global Notes and, if so, the identity of the depositary, if any, for such
Global Note or Notes; (13) any addition to, or modification or deletion of,
any Events of Default or covenants provided for with respect to the Offered
Securities; (14) any index used to determine the amount of payments of
principal of and premium, if any, and interest on the Offered Debt Securities;
and (15) any other terms of the Offered Debt Securities not inconsistent with
the terms of the Indentures.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and any premium and interest on the Offered Debt Securities will
be payable, and the Offered Debt Securities will be exchangeable and transfers
thereof will be registrable, at the corporate trust office of the Trustee in
New York, New York, provided that, at the option of the Company, payment of
any interest may be made by check mailed to the address of the person entitled
thereto as it appears in the Security Register. Unless otherwise indicated in
the Prospectus Supplement relating thereto, payment of any interest due on any
Offered Debt Security will be made to the Person in whose name such Offered
Debt Security is registered at the close of business on the Regular Record
Date for such interest. (Indentures, Sections 301, 305, 307 and 1002)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued only in fully registered form
without coupons in denominations of $1,000 or any integral multiple
8
<PAGE>
thereof, and no service charge will be made for any transfer or exchange of
such Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Indentures, Sections 302 and 305)
Debt Securities may be issued under either Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof. Special Federal income tax, accounting and other
considerations applicable thereto will be described in the Prospectus
Supplement relating to any such Original Issue Discount Securities.
SENIOR DEBT
Debt Securities that will constitute part of the senior debt of the Company
will be issued under the Senior Debt Indenture and will rank pari passu with
all other unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT
Debt Securities that will constitute part of the subordinated debt of the
Company will be issued under the Subordinated Debt Indenture.
Debt Securities issued under the Subordinated Debt Indenture will be
subordinate and junior in right of payment, to the extent and in the manner
set forth in the Subordinated Debt Indenture, to all "Senior Indebtedness," as
defined therein, of the Company. The Subordinated Debt Indenture defines
"Senior Indebtedness" as obligations (other than nonrecourse obligations, the
Debt Securities issued under the Subordinated Debt Indenture and any other
obligations specifically designated as being subordinate in right of payment
to such Senior Indebtedness) of, or guaranteed or assumed by, the Company for
borrowed money or evidenced by bonds, debentures, notes or other similar
instruments, and amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligations. (Subordinated Debt
Indenture, Section 1.01)
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceeding in
respect of the Company or a substantial part of its property, or (b) that (i)
a default shall have occurred with respect to the payment of principal of (and
premium, if any) or any interest on or other monetary amounts due and payable
on any Senior Indebtedness (as defined in the Subordinated Debt Indenture) or
(ii) there shall have occurred an event of default (other than a default in
the payment of principal, premium, if any, or interest, or other monetary
amounts due and payable) with respect to any Senior Indebtedness, as defined
in the Subordinated Debt Indenture or in the instrument under which the same
is outstanding, permitting the holder or holders thereof to accelerate the
maturity thereof (with notice or lapse of time, or both), and such event of
default shall have continued beyond the period of grace, if any, in respect
thereof, and such default or event of default shall not have been cured or
waived or shall not have ceased to exist, or (c) that the principal of and
accrued interest on Debt Securities issued under the Subordinated Debt
Indenture shall have been declared due and payable upon an Event of Default
pursuant to Section 5.01 of the Subordinated Debt Indenture and such
declaration shall not have been rescinded and annulled as provided therein,
then the holders of all Senior Indebtedness (as defined in the Subordinated
Debt Indenture) shall first be entitled to receive payment of the full amount
unpaid thereon, or provision shall be made for such payment in money or
money's worth, before the holders of any of Debt Securities issued under the
Subordinated Debt Indenture are entitled to receive a payment on account of
the principal of (and premium, if any) or any interest on the indebtedness
evidenced by such Debt Securities. (Subordinated Debt Indenture, Section
13.01) If this Prospectus is being delivered in connection with a series of
Debt Securities issued under the Subordinated Debt Indenture, the accompanying
Prospectus Supplement or the information incorporated herein by reference will
set forth the approximate amount of Senior Indebtedness (as defined in the
Subordinated Debt Indenture) outstanding as of the end of the most recent
fiscal quarter.
CERTAIN COVENANTS OF THE COMPANY
Restrictions on Liens. The Senior Debt Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, issue, assume or
guarantee any Indebtedness secured by any mortgage, security
9
<PAGE>
interest, pledge, lien or other encumbrance (herein referred to as a
"Mortgage" or "Mortgages") upon any Operating Property or Operating Asset of
the Company or any Restricted Subsidiary, whether such assets are now owned or
hereafter acquired, without in any such case effectively providing that the
Debt Securities (together with, if the Company shall so determine, any other
Indebtedness ranking equally with the Debt Securities) shall be secured
equally and ratably with such Indebtedness except that the foregoing
restrictions shall not apply to (i) the giving, simultaneously with or within
180 days after the latest of May 15, 1988, or the acquisition or construction
of such property, of a purchase money Mortgage on property acquired or
constructed after May 15, 1988, or the acquisition after May 15, 1988, of
property subject to any Mortgage which is limited to such property and which
secures Indebtedness not in excess of the lesser of the cost or fair market
value of such property, (ii) the giving by the Company or a Restricted
Subsidiary of a Mortgage on real property which is the sole security for
Indebtedness incurred within two years after the latest of May 15, 1988, the
acquisition of the property or completion of the first substantial
improvements thereon, provided that the Indebtedness does not exceed the
lesser of the cost of the property and improvements or their fair market value
and the holder of such Indebtedness is entitled to enforce its payment only by
resorting to such security, and (iii) Mortgages, or renewals thereof, existing
on the date of the Senior Debt Indenture or on assets of a Restricted
Subsidiary existing on the date it became a Subsidiary. Notwithstanding the
foregoing, the Company or any Restricted Subsidiary may create or assume
Mortgages in addition to those permitted above, and renew, extend or replace
such Mortgages provided that at the time of such creation, assumption,
renewal, extension or replacement, and after giving effect thereto, Exempted
Debt does not exceed 5% of Consolidated Net Tangible Assets. (Senior Debt
Indenture, Section 1007) On May 15, 1988, no Operating Properties were subject
to any liens.
Restrictions on Sale and Leaseback Transactions. The Senior Debt Indenture
provides that the Company will not, nor will it permit any Restricted
Subsidiary to, enter into any arrangement with any person providing for the
leasing by the Company or any Restricted Subsidiary of any Operating Property
or Operating Asset which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such person (a "Sale and Leaseback
Transaction") unless the net proceeds of such sale or transfer have been
determined by the Company's Board of Directors to be at least equal to the
fair value of such Operating Property or Operating Assets at the time of such
sale and transfer and (i) within 180 days after the receipt of the proceeds of
such sale and transfer, either the Company or any Restricted Subsidiary
applies an amount equal to such net proceeds to the prepayment or retirement
(other than any mandatory prepayment or retirement) of Senior Funded Debt of
the Company or such Restricted Subsidiary, or (ii) the Company or such
Restricted Subsidiary would be entitled, at the time of the effective date of
such sale or transfer, to incur indebtedness secured by a Mortgage on such
Operating Property or Operating Assets in an amount at least equal to the
Attributable Debt in respect thereof, without equally and ratably securing the
Debt Securities pursuant to the "Restrictions on Liens" described above. The
foregoing restriction shall not apply to (i) any Sale and Leaseback
Transaction for a term of not more than two years, including renewals, (ii) in
the case of any Operating Property acquired or constructed subsequent to May
15, 1986, any Sale and Leaseback Transaction with respect thereto (including
presently owned real property upon which such Operating Property is to be
constructed) if a binding commitment is entered into within two years after
the later of the acquisition of the property or completion of the first
substantial improvements thereon and (iii) any Sale and Leaseback Transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries provided that the lessor shall be the Company or a whollyowned
Restricted Subsidiary. (Senior Debt Indenture, Section 1008)
Exempted Debt. Notwithstanding the restrictions in the Senior Debt Indenture
on (i) Mortgages and (ii) Sale and Leaseback Transactions, the Company or its
Restricted Subsidiaries may, in addition to amounts permitted under such
restrictions, create Indebtedness secured by Mortgages, or enter into Sale and
Leaseback Transactions, provided that, after giving effect thereto, the
aggregate outstanding amount of all such Indebtedness secured by Mortgages
plus Attributable Debt resulting from such Sale and Leaseback Transactions
does not exceed 5% of Consolidated Net Tangible Assets (collectively, the
"Exempted Debt"). (Senior Debt Indenture, Sections 1007(b) and 1008(b))
10
<PAGE>
No Special Protection in the Event of a Highly Leveraged Transaction. Unless
otherwise indicated in the Prospectus Supplement relating thereto, the terms
of the Offered Debt Securities will not afford the holders special protection
in the event of a highly leveraged transaction.
CERTAIN DEFINITIONS
Set forth below are certain significant terms which are defined in Section
101 of the Senior Debt Indenture:
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value (discounted at the actual rate of
interest of such transaction) of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Capitalized Lease Obligations" means obligations created pursuant to leases
which are required to be shown on the liability side of a balance sheet in
accordance with generally accepted accounting principles.
"Consolidated" when used with respect to any of the terms defined in the
Senior Debt Indenture, refers to such terms as reflected in a consolidation of
the accounts of the Company and its Restricted Subsidiaries in accordance with
generally accepted accounting principles.
"Funded Debt" means indebtedness which matures more than one year from the
date of computation, or which is extendable or renewable at the sole option of
the obligor so that it may become payable more than one year from such date,
but, generally, shall not include obligations created pursuant to leases.
"Indebtedness" means, generally, all obligations for borrowed money,
including obligations secured by liens on property owned by a person whether
or not such person is directly liable therefor.
"Investment" means and includes any investment in stock, evidences of
indebtedness, loans or advances, however made or acquired, but shall not
include accounts receivable of the Company or of any Restricted Subsidiary
arising from transactions in the ordinary course of business, or any evidences
of indebtedness, loans or advances made in connection with the sale to any
Subsidiary of accounts receivable of the Company or any Restricted Subsidiary
arising from transactions in the ordinary course of business of the Company or
any Restricted Subsidiary.
"Net Tangible Assets" means the total amounts of assets (less depreciation
and valuation reserves and other reserves and items deductible from gross book
value of specific asset accounts under generally accepted accounting
principles) which under generally accepted accounting principles would be
included on a balance sheet after deducting therefrom (i) all liability items
except Funded Debt, Capitalized Lease Obligations, stockholders' equity and
reserves for deferred income taxes, (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, which in each such case would be so included on such balance
sheet, (iii) Investments (less applicable reserves) in, or equity in the net
assets of, NonRestricted Subsidiaries in excess of the amount of such
Investments and equity in net assets on January 30, 1988, and (iv) capitalized
property rights created pursuant to Capitalized Lease Obligations. As of
January 30, 1988, the amount of Investments in, or equity in the net assets
of, NonRestricted Subsidiaries totaled approximately $308,320,000.
"Operating Assets" means all merchandise inventories, furniture, fixtures
and equipment (including all transportation and warehousing equipment but
excluding office equipment and data processing equipment) owned by the Company
or a Restricted Subsidiary.
"Operating Property" means all real property and improvements thereon owned
by the Company or a Restricted Subsidiary and constituting, without
limitation, any store, warehouse, service center or distribution center
wherever located; provided that such term shall not include any store,
warehouse, service center or distribution center which the Company's Board of
Directors declares by resolution not to be of material importance to the
business of the Company and its Restricted Subsidiaries.
11
<PAGE>
"Restricted Subsidiaries" means all Subsidiaries other than NonRestricted
Subsidiaries. "NonRestricted Subsidiaries" means (i) any Subsidiary so
designated by the Board of Directors of the Company in accordance with the
Indenture, and (ii) any other Subsidiary of which the majority of the voting
stock is owned directly or indirectly by one or more NonRestricted
Subsidiaries. The Senior Debt Indenture provides that the Company's Board of
Directors may change the designations of Restricted Subsidiaries and
NonRestricted Subsidiaries. (Senior Debt Indenture, Section 1009) Initially
the Company will have no Restricted Subsidiaries.
"Senior Funded Debt" means all Funded Debt of the Company or any person
(except Funded Debt, the payment of which is subordinated to the payment of
the Debt Securities).
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having voting power under ordinary circumstances to elect a
majority of the board of directors of said corporation or business entity is
at the time owned or controlled by the Company, or by the Company and one or
more Subsidiaries, or by any one or more Subsidiaries.
MERGER AND CONSOLIDATION
Each Indenture provides that the Company may, without the consent of the
Holders of the Debt Securities, consolidate with or merge into any other
corporation, or convey, transfer or lease its properties and assets
substantially as an entirety to any person, provided that in any such case (i)
the successor corporation shall be a domestic corporation and such corporation
shall assume by a supplemental indenture the Company's obligations under such
Indenture and the Debt Securities, (ii) immediately after such transaction, no
Event of Default shall have happened and be continuing, and (iii) if as a
result of any such merger, consolidation, or such conveyance, transfer or
lease an Operating Property of the Company would become subject to a Mortgage
which would not be permitted under "Restrictions on Liens" described above,
the senior Debt Securities would be secured, equally and ratably with (or
prior to) all indebtedness so secured. Upon compliance with these provisions
by a successor corporation, the Company (except in the case of a lease) would
be relieved of its obligations under each Indenture and the Debt Securities.
(Indentures, Sections 801 and 802)
EVENTS OF DEFAULT
The following will be Events of Default under each Indenture with respect to
Debt Securities of any series: (a) default in payment of principal of or
premium, if any, on any Debt Security of that series when due; (b) default in
payment of any interest on any Debt Security of that series when due,
continued for 30 days; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Debt Security of that series; (d) default in the
performance or breach of any other covenant or warranty of the Company in such
Indenture (other than a covenant or warranty a default in whose performance or
whose breach is elsewhere in such Indenture specifically dealt with or which
has been included in such Indenture solely for the benefit of series of Debt
Securities other than that series), continued for 60 days after written notice
as provided in such Indenture; (e) if so specified in the Prospectus
Supplement accompanying this Prospectus that this clause (e) shall apply to
the Debt Securities of that series (and set forth in the Prospectus Supplement
relating to the Debt Securities of that series), acceleration of any
indebtedness for money borrowed by the Company or any of its Subsidiaries
under the terms of the instrument under which such indebtedness is issued or
secured in an aggregate principal amount exceeding $20 million, if such
acceleration is not discharged within 10 days after written notice as provided
in such Indenture, or failure by the Company or any of its Subsidiaries to pay
any such indebtedness at the later of final maturity or upon expiration of any
applicable period of grace with respect to such principal amount, and such
failure to pay shall not have been cured by the Company or any of its
Subsidiaries within 30 days after such failure; (f) bankruptcy, insolvency or
reorganization; and (g) any other Event of Default provided with respect to
Debt Securities of that series. No Event of Default with respect to a
particular series of Debt Securities issued under such Indenture (except as to
such events in bankruptcy, insolvency or reorganization) necessarily
constitutes an Event of Default with respect to any other series of Debt
Securities issued thereunder. (Indentures, Section 501)
12
<PAGE>
If an Event of Default (other than an Event of Default specified in clause
(f) above) with respect to Debt Securities of any series at the time
Outstanding shall occur and be continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series may, by a notice in writing to the
Company (and to the Trustee if given by Holders), declare to be due and
payable immediately the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all Debt Securities
of that series. However, at any time after such a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in principal amount of Outstanding Debt
Securities of that series may, subject to certain conditions, rescind and
annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal, with respect to Debt Securities of that series have
been cured or waived as provided in such Indenture. (Indentures, Section 502)
For information as to waiver of defaults, see "Modification and Waiver"
herein. Reference is made to the Prospectus Supplement relating to any series
of Offered Debt Securities which are Original Issue Discount Securities for
the particular provisions relating to acceleration of a portion of the
principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof. If an Event of
Default specified in clause (f) above occurs, the principal amount (or, if the
Debt Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series) of all Debt Securities then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
Subject to the provisions of the Indentures relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, each
Indenture provides that the Trustee will be under no obligation to exercise
any of its rights or powers under such Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security and indemnity. (Indentures, Sections 601 and 603) Subject
to such provisions for security and indemnification of the Trustee and certain
other rights of the Trustee, the Holders of a majority in principal amount of
the Outstanding Debt Securities of any series shall have the right to direct
the time, method and place of conducting any proceedings for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Debt Securities of that series. (Indentures,
Section 512)
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to either Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to Debt
Securities of that series and unless also the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable security and indemnity, to the
Trustee to institute such proceeding as trustee, and the Trustee shall not
have received from the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
(Indentures, Section 507) Notwithstanding the foregoing, the Holder of any
Debt Security will have an absolute and unconditional right to receive payment
of the principal of (and premium, if any) and any interest on such Debt
Security on or after the due dates expressed in such Debt Security and to
institute suit for the enforcement of any such payment. (Indentures, Section
508)
Each Indenture requires the Company to furnish to the Trustee annually a
statement as to compliance with such Indenture. (Indentures, Section 1011)
Each Indenture provides that the Trustee may withhold notice to the Holders of
Debt Securities of any series of any default (except in payment of principal,
any premium, interest or any sinking fund payments) with respect to Debt
Securities of such series if it considers it in the interest of the Holders of
Debt Securities of such series to do so. (Indentures, Section 602)
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the Company
and the Trustee with the consent of the Holders of 66 2/3% in principal amount
of the Outstanding Debt Securities of each series affected
13
<PAGE>
by such modifications or amendments; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the stated maturity
date of the principal of, or any installment of principal of or interest on,
any Debt Security, (b) reduce the principal amount of, or the premium (if any)
or any interest on, any Debt Security or reduce the amount of principal of an
Original Issue Discount Security that would be due and payable upon
acceleration, (c) change the place or currency of payment of principal of, or
premium (if any) or interest on, any Debt Security, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Debt Security after the stated maturity date, or (e) reduce the percentage in
principal amount of Outstanding Debt Securities of any series, the consent of
whose Holders is required for modification or amendment of such Indenture, for
waiver of compliance with certain provisions of such Indenture or for waiver
of certain defaults. (Indentures, Section 902)
The Holders of 66 2/3% in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities
of that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the applicable Indenture.
(Indentures, Section 1012) The Holders of a majority in principal amount of
the Outstanding Debt Securities of any series may on behalf of the Holders of
all Debt Securities of that series waive any past default under the applicable
Indenture with respect to that series except a default in the payment of the
principal of (or premium, if any) or any interest on any Debt Security of that
series or in respect of a provision which under such Indenture cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security of that series affected. (Indentures, Section 513)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Debt Securities issued thereunder without the
written consent of each holder of Senior Indebtedness (as defined therein)
then outstanding that would be adversely affected thereby. (Subordinated Debt
Indenture, Section 8.06)
DEFEASANCE OF OFFERED DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN
CIRCUMSTANCES
Defeasance and Discharge. Each Indenture provides that the Board of
Directors of the Company may provide by resolution that the Company will be
discharged from any and all obligations in respect of the Debt Securities of
any series (except for certain obligations to register the transfer or
exchange of Debt Securities of such series, to replace stolen, lost or
mutilated Debt Securities of such series, to maintain paying agencies and hold
moneys for payment in trust) upon the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations (as defined), which through the
payment of interest and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay any installment of principal (and
premium, if any) and interest on and any mandatory sinking fund payments in
respect of the Debt Securities of such series on the stated maturity of such
payments in accordance with the terms of such Indenture and such Debt
Securities. Such discharge may only occur if (i) the Company has received
from, or there has been published by, the United States Internal Revenue
Service a ruling to the effect that such a discharge will not be deemed, or
result in, a taxable event with respect to Holders of the Debt Securities of
such series; and such discharge will not be applicable to any Debt Securities
of such series then listed on the New York Stock Exchange or any other
securities exchange if the provision would cause said Debt Securities to be
de-listed as a result thereof (Indentures, Section 403), and (ii) in the case
of the Subordinated Debt Indenture (a) no event or condition shall exist that
would prevent the Company from making payments of principal of (and premium,
if any) and interest on the Debt Securities issued pursuant to the
Subordinated Debt Indenture at the date of the irrevocable deposit referred to
above or at any time during the period ending on the 91st day after such
deposit date and (b) the Company delivers to the Debt Securities Trustee for
the Subordinated Debt Indenture an opinion of counsel to the effect that (1)
the trust funds will not be subject to any rights of holders of Senior
Indebtedness (as defined for purposes of the Subordinated Debt Indenture) and
(2) after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, except that if a court
were to rule under any such law in any case or proceeding that the trust funds
remained property of the Company, then the relevant Debt Securities Trustee
and the holders of such Debt Securities would be entitled to certain rights as
secured creditors in such trust funds.
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Defeasance of Certain Covenants. The Senior Debt Indenture provides that the
Board of Directors of the Company may by resolution provide that the terms of
any series of Debt Securities may provide the Company with the option to omit
to comply with certain restrictive covenants described in Sections 1007
through 1009 of the Indentures. The Company, in order to exercise such option,
will be required to deposit with the Trustee money and/or U.S. Government
Obligations (as defined) which through the payment of interest and principal
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal (and premium, if any) and interest on and any
mandatory sinking fund payments in respect of the Debt Securities of such
series on the stated maturity of such payments in accordance with the terms of
such Indenture and such Debt Securities. The Company will also be required to
deliver to the Trustee an opinion of counsel to the effect that the deposit
and related covenant defeasance will not cause the Holders of the Debt
Securities of such series to recognize income, gain or loss for Federal income
tax purposes. (Indentures, Section 1010)
Defeasance and Events of Default. In the event the Company exercises its
option to omit compliance with certain covenants of an Indenture with respect
to any series of Debt Securities and the Debt Securities of such series are
declared due and payable because of the occurrence of any Event of Default,
the amount of money and U.S. Government Obligations on deposit with the
Trustee will be sufficient to pay amounts due on the Debt Securities of such
series at the time of their Stated Maturity but may not be sufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company shall
remain liable for such payments.
The Prospectus Supplement will state if any defeasance provision will apply
to the Offered Debt Securities.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank (formerly known as Chemical Bank) ("Chase") is the
Trustee under the Indentures and is also the trustee under prior indentures
between the Company and Chase. Chase maintains normal banking relations with
the Company, including participating in and acting as Agent for a credit
agreement for the Company and Dillard Investment Co., Inc., a wholly owned
subsidiary of the Company ("DIC"). Chase also is the trustee under indentures
between DIC and Chase.
GOVERNING LAW
The Debt Securities and the Indentures will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock is qualified in its
entirety by the provisions of the Company's Restated Certificate of
Incorporation, as amended, which is an exhibit to the registration statement
of which this Prospectus is a part.
GENERAL
The authorized capital stock of the Company consists of 5,000 shares of 5%
Cumulative Preferred Stock (the "5% Preferred Stock"), par value $100 per
share; 289,000,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"); 11,000,000 shares of Class B Common Stock, par
value $.01 per share (the "Class B Common Stock"); and 10,000,000 shares of
Additional Preferred Stock, par value $.01 per share (the "Additional
Preferred Stock"). At July 14, 1998, 4,400 shares of the authorized 5%
Preferred Stock were issued and outstanding, 102,797,508 shares of the
authorized Class A Common Stock were issued and outstanding, 4,016,929 shares
of the Class B Common Stock were issued and outstanding, and no shares of
Additional Preferred Stock were issued and outstanding.
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VOTING RIGHTS
The holders of the Class A and the Class B Common Stock have the right to
one vote per share upon all matters which may come before stockholders'
meetings, except that the holders of Class A Common Stock are empowered as a
class to elect one-third of the members of the Board of Directors and the
holders of Class B Common Stock are empowered as a class to elect two-thirds
of the members of the Board of Directors. The entire Board of Directors is
elected annually.
The affirmative vote of the holders of four-fifths of both the Class A and
Class B Common Stock considered as one class is required (i) for the adoption
of any agreement for the merger or consolidation of the Company with or into
any other corporation, (ii) to authorize the sale, lease or exchange of all or
substantially all of the assets of the Company, or any sale, lease or exchange
of assets to the Company or any subsidiary of the Company in exchange for
securities of the Company, or (iii) to authorize the dissolution or
liquidation of the Company. Such vote, however, is not required (i) if the
Board of Directors shall have approved a memorandum of understanding with
respect to such transaction, or (ii) in the event of a merger or consolidation
of the Company with, or any sale, lease or exchange to the Company or any
subsidiary of any of the assets of, any corporation of which a majority of the
outstanding voting securities is owned of record or beneficially by the
Company and its subsidiaries.
Since holders of Class A and Class B Common Stock do not have cumulative
voting rights, holders of more than 50% of the Class A Common Stock voting for
the election of Directors can elect one-third of the Board of Directors and
the holders of more than 50% of the Class B Common Stock voting for the
election of Directors can elect two-thirds of the Board of Directors. In such
event, holders of the remaining shares voting for the election of the
Directors will be unable to elect Directors. W.D. Company, Inc. ("W.D.
Company") owns 99.2% of the Company's Class B Common Stock and can therefore
elect two-thirds of the Company's Board of Directors. William Dillard,
Chairman of the Board of Directors of the Company, William Dillard II, Chief
Executive Officer, Alex Dillard, President, and Mike Dillard, Executive Vice
President, are directors and officers of W.D. Company and own 21.3%, 25.1%,
23.3% and 22.0%, respectively, of the outstanding voting stock of W.D.
Company.
The holders of the 5% Preferred Stock have no voting rights, except as
provided by Section 242 of the Delaware General Corporation Law, which states
that the holders of the outstanding shares of any class of capital stock shall
be entitled to vote as a class upon any proposed amendment to the certificate
of incorporation, whether or not entitled to vote thereon by the certificate
of incorporation, if the amendment would increase or decrease the aggregate
number of authorized shares of such class (subject to certain conditions),
increase or decrease the par value of the shares of such class, or alter or
change the powers, preferences, or special rights of the shares of such class
so as to affect them adversely.
The Company's Restated Certificate of Incorporation, as amended, authorizes
the Board of Directors to fix by resolution the designations, preferences, and
relative rights, qualifications and limitations, of shares of Additional
Preferred Stock, including, among other things, (a) the number of shares and
the distinctive designation of each series, if any, and whether the shares of
any series would rank prior to, junior to, or on a parity with, the shares of
another series; (b) the dividend rate, conditions and preferences over the
Company's Common Stock, if any, and the date on which any dividends would be
declared and paid; (c) whether, and to what extent, the holders would have
voting rights in addition to those prescribed by statute; (d) whether, and
upon what terms, the shares would be convertible into or exchangeable for
other securities; (e) whether, and upon what terms, the shares would be
redeemable; (f) whether or not a sinking fund would be provided for the
redemption of the securities, and, if so, the terms and conditions thereof;
and (g) preference, if any, to which the class or series thereof would be
entitled in the event of voluntary or involuntary liquidation, dissolution or
winding up of the Company.
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CONVERSION AND PRE-EMPTIVE RIGHTS
Shares of Class B Common Stock are convertible at any time at the option of
any holder thereof into shares of Class A Common Stock at the rate of one
share of Class B Common Stock for one share of Class A Common Stock. Under
Delaware law and the Company's Restated Certificate of Incorporation, no
holder of capital stock has preemptive rights.
DIVIDENDS
Holders of 5% Preferred Stock are entitled to receive dividends at the rate
of 5% per annum, payable February 1 and August 1 of each year, before any
dividends may be paid on Class A and Class B Common Stock. Dividends on the 5%
Preferred Stock shall be cumulative from year to year if not paid and all
accrued and unpaid dividends must be paid on the 5% Preferred Stock before any
dividends may be paid upon the Common Stock in any year. Holders of Class A
and Class B Common Stock are entitled to receive equally, share for share, any
dividends which may be declared upon Common Stock. No dividend may be declared
on Common Stock of either class unless a similar dividend is declared on
Common Stock of the other class. However, in the case of dividends in stock of
the Company or stock splits, holders of each class of Common Stock are
entitled to receive only shares of the same class.
LIQUIDATION AND REDEMPTION RIGHTS
Upon final liquidation of the Company, holders of 5% Preferred Stock are
entitled to receive $100 per share plus accrued dividends before any
distribution to holders of Common Stock, and holders of Common Stock are
entitled to share equally, share for share, in the distribution of the
remaining assets of the Company. The Company may redeem all or any part of the
5% Preferred Stock at par value plus accrued dividends at any time. The Common
Stock is not subject to redemption.
OTHER
All outstanding shares of the Company's capital stock are fully paid and
nonassessable.
The transfer agent and registrar for the Class A Common Stock is
ChaseMellon, Ridgefield Park, New Jersey.
DESCRIPTION OF CAPITAL SECURITIES
Each Issuer Trust will issue only one series of Capital Securities and one
series of Common Securities. The Trust Agreement for each Issuer Trust will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Capital Securities will have such terms and
will be subject to such conditions as shall be set forth in the Trust
Agreement or made a part thereof by the Trust Indenture Act. This summary of
certain provisions of the Capital Securities and each Trust Agreement does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of each Trust Agreement, including the
definitions therein of certain terms. Wherever particular defined terms of a
Trust Agreement are referred to herein, such defined terms are incorporated
herein by reference. A copy of the form of the Trust Agreement is available
upon request from the Issuer Trustees.
GENERAL
The Capital Securities will represent preferred undivided beneficial
interests in the assets of the applicable Issuer Trust. The only assets of an
Issuer Trust, and its only source of its revenues, will be the Debt Securities
purchased by such Issuer Trust with the proceeds from the issuance of its
Trust Securities. Accordingly, Distributions and other payment dates for such
Trust Securities will correspond with the interest and other payment dates for
such Debt Securities. See "Description of Debt Securities" in this Prospectus
and in the
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applicable Prospectus Supplement for a description of such Debt Securities. If
the Company does not make payments on such Debt Securities in accordance with
their terms, such Issuer Trust will not have funds available to pay
Distributions or other amounts payable on the Trust Securities issued by such
Issuer Trust in accordance with their terms. The Capital Securities issued by
an Issuer Trust will rank pari passu, and payments thereon will be made
thereon pro rata, with the Common Securities issued by such Issuer Trust
except as described below under "--Subordination of Common Securities" and in
the applicable Prospectus Supplement. Capital Securities will be fully and
unconditionally guaranteed by the Company, to the extent described herein
under "Description of Guarantees" and in the applicable Prospectus Supplement.
Reference is made to the applicable Prospectus Supplement for the following
terms of and information relating to the Capital Securities offered hereby and
thereby (to the extent such terms are applicable to such Capital Securities):
(i) the specific designation, stated amount per Capital Security (the
"Liquidation Amount"), number to be issued by the applicable Issuer Trust and
purchase price; (ii) the currency or units based on or relating to currencies
in which Distributions and other payments thereon will or may be payable;
(iii) the Distribution rate or rates (or the method by which such rate or
rates will be determined), if any; (iv) the date or dates on which any such
Distributions will be payable; (v) any provisions relating to deferral of
Distribution payments; (vi) the place or places where Distributions and other
amounts payable on such Capital Securities will be payable; (vii) any
repayment, redemption, prepayment or sinking fund provisions; (viii) the
voting rights, if any, of holders of such Capital Securities; (ix) the terms
and conditions, if any, upon which the assets of such Issuer Trust may be
distributed to holders of such Capital Securities; (x) any applicable United
States federal income tax consequences; and (xi) any other specific terms of
such Capital Securities.
DISTRIBUTIONS
Distributions on the Capital Securities will be cumulative. Distributions
will accumulate from the date of original issuance and will be payable on such
dates as specified in the applicable Prospectus Supplement. The amount of
Distributions payable for any period less than a full Distribution period will
be computed on the basis of a 360-day year of twelve 30-day months and the
actual days elapsed in a partial month in such period, unless otherwise
specified in the applicable Prospectus Supplement. Distributions payable for
each full Distribution period will be computed by dividing the rate per annum
by four, unless otherwise specified in the applicable Prospectus Supplement.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and other amounts payable under the Capital
Securities and Common Securities issued by an Issuer Trust shall be made pro
rata based on the Liquidation Amount of such Capital Securities and Common
Securities. However, unless otherwise provided in the applicable Prospectus
Supplement, if on any date on which Distributions or other amounts are payable
with respect to such Capital Securities and Common Securities, an "Event of
Default" with respect to the Debt Securities owned by such Issuer Trust (a
"Debenture Event of Default") has occurred and is continuing as a result of
any failure by the Company to pay any amounts in respect of such Debt
Securities when due, no payment of any Distribution on or other amounts
payable under such Common Securities shall be made unless payment in full in
cash of all accumulated amounts then due and payable with respect to all of
such Issuer Trust's outstanding Capital Securities shall have been made or
provided for, and all funds immediately available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions on,
and all other amounts with respect to, Capital Securities then due and
payable.
In the case of any Capital Securities Event of Default (as defined below)
resulting from a Debenture Event of Default, the holders of the applicable
Issuer Trust's Common Securities will be deemed to have waived any right to
act with respect to any such Capital Securities Event of Default under the
applicable Trust Agreement until the effects of such Debenture Event of
Default with respect to such Capital Securities have been cured, waived or
otherwise eliminated. See "--Capital Securities Events of Default; Notice" and
"Description of Debt Securities--Events of Default." Until all such Capital
Securities Events of Default have been so cured, waived
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or otherwise eliminated, the Property Trustee will act solely on behalf of the
holders of the Capital Securities and not on behalf of the holders of the
Common Securities, and only the holders of the Capital Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The amount payable on Capital Securities in the event of any liquidation of
an Issuer Trust will be the stated amount per Capital Security or such other
amount as specified in the applicable Prospectus Supplement plus accumulated
and unpaid Distributions, which, if specified in the applicable Prospectus
Supplement, may be in the form of a distribution of the Debt Securities owned
by such Issuer Trust.
The holders of all the outstanding Common Securities of an Issuer Trust will
have the right at any time to dissolve such Issuer Trust and, after
satisfaction of liabilities to creditors of such Issuer Trust as provided by
applicable law, cause the Debt Securities owned by such Issuer Trust to be
distributed to the holders of the Capital Securities and Common Securities in
liquidation of such Issuer Trust as described in the applicable Prospectus
Supplement. Other terms for the dissolution of an Issuer Trust and the
distribution or liquidation of its assets to holders of Trust Securities will
be set forth in the applicable Prospectus Supplement.
CAPITAL SECURITIES EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under a
Trust Agreement (a "Capital Securities Event of Default") with respect to the
Capital Securities issued pursuant thereto (whatever the reason for such
Capital Securities Event of Default and whether it is voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of an Event of Default with respect to the Debt
Securities in which the proceeds of the Capital Securities have been
invested (a "Debenture Event of Default") (see "Description of Debt
Securities--Events of Default" and the applicable Prospectus Supplement);
or
(ii) default by the applicable Issuer Trust or the Property Trustee in
the payment of any Distribution on such Capital Securities when it becomes
due and payable, and continuation of such default for a period of 30 days;
or
(iii) default by an Issuer Trust or the Property Trustee in the payment
of any redemption price of any Trust Security issued pursuant to such Trust
Agreement when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the applicable Issuer Trustees (other than a
covenant or warranty, a default in the performance of which or the breach
of which is dealt with in clause (ii) or (iii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to such Issuer Trustees and the Company by
the holders of at least 25% in aggregate Liquidation Amount of such Capital
Securities outstanding, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" under the applicable Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee or all or substantially all of its property
if a successor Property Trustee has not been appointed within 90 days
thereof.
Within ten Business Days after the occurrence of any Capital Securities
Event of Default actually known to the Property Trustee, the Property Trustee
will transmit notice of such Event of Default to the holders of the applicable
Trust Securities and the Administrators, unless such Capital Securities Event
of Default has been cured or waived. The Company, as Depositor, and the
Administrators are required to file annually with the Property Trustee a
certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under each Trust Agreement.
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If a Debenture Event of Default has occurred and is continuing as a result
of any failure by the Company to pay any amounts in respect of the Debt
Securities owned by an Issuer Trust when due, the Capital Securities issued by
such Issuer Trust will have a preference over the Common Securities issued by
such Issuer Trust with respect to payments of any amounts in respect of such
Capital Securities as described above. See "--Subordination of Common
Securities."
REMOVAL OF ISSUER TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of at least a majority in aggregate Liquidation Amount of the
outstanding Capital Securities may remove an Issuer Trustee for cause or, if a
Debenture Event of Default has occurred and is continuing, with or without
cause. If an Issuer Trustee is removed by the holders of the outstanding
Capital Securities, the successor may be appointed by the holders of at least
25% in Liquidation Amount of Capital Securities. If an Issuer Trustee resigns,
such Issuer Trustee will appoint its successor. If an Issuer Trustee fails to
appoint a successor, the holders of at least 25% in Liquidation Amount of the
outstanding Capital Securities may appoint a successor. If a successor has not
been appointed by the holders, any holder of Capital Securities or Common
Securities or another Issuer Trustee may petition a court of competent
jurisdiction to appoint a successor. Any Delaware Trustee must meet the
applicable requirements of Delaware law. Any Property Trustee must be a
national- or state-chartered bank, and at the time of appointment have capital
and surplus of at least $50,000,000. No resignation or removal of an Issuer
Trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the applicable Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which an Issuer Trustee may be merged or converted or with
which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Issuer Trustee is a party, or any
entity succeeding to all or substantially all the corporate trust business of
such Issuer Trustee, will be the successor of such Issuer Trustee under each
Trust Agreement, provided such entity is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER TRUSTS
An Issuer Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except as described below or as
otherwise set forth in the applicable Trust Agreement. An Issuer Trust may, at
the request of the holders of the Common Securities and with the consent of
the holders of at least a majority in aggregate Liquidation Amount of its
outstanding Capital Securities, merge with or into, consolidate, amalgamate,
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of
any State, so long as (i) such successor entity either (a) expressly assumes
all the obligations of the Issuer Trust with respect to the Issuer Trust's
Capital Securities or (b) substitutes for the Issuer Trust's Capital
Securities other securities having substantially the same terms as the Issuer
Trust's Capital Securities (the "Successor Securities") so long as the
Successor Securities have the same priority as the Issuer Trust's Capital
Securities with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) a trustee of such successor entity, possessing
the same powers and duties as the Property Trustee, is appointed to hold the
corresponding Debt Securities, (iii) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Issuer Trust's
Capital Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Issuer Trust's Capital Securities (including any Successor Securities) in
any material respect, (v) such successor entity has a purpose substantially
identical to that of the Issuer Trust, (vi) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Issuer Trust has received an opinion from independent counsel experienced in
such matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights,
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preferences and privileges of the holders of the Issuer Trust's Capital
Securities (including any Successor Securities) in any material respect and
(b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Issuer Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act, and (vii) the Company or any permitted successor or
assignee owns, directly or indirectly, all the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the related
Guarantee. Notwithstanding the foregoing, an Issuer Trust may not, except with
the consent of holders of 100% in aggregate Liquidation Amount of the Issuer
Trust's Capital Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to, any other entity or permit any other entity
to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause the Issuer Trust or the successor entity to be taxable as a
corporation for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENTS
Except as provided below and under "--Removal of Issuer Trustees;
Appointment of Successors" and "Description of Guarantees--Amendments and
Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Capital Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the holders of a
majority in aggregate Liquidation Amount of the Common Securities and the
Property Trustee, without the consent of the holders of the Capital
Securities, (i) to cure any ambiguity, correct or supplement any provisions in
such Trust Agreement that may be inconsistent with any other provision, or to
make any other provisions with respect to matters or questions arising under
such Trust Agreement, provided that any such amendment does not adversely
affect in any material respect the interests of any holder of Trust
Securities, or (ii) to modify, eliminate or add to any provisions of such
Trust Agreement to such extent as may be necessary to ensure that the Issuer
Trust will not be taxable as a corporation for United States federal income
tax purposes at any time that any Trust Securities are outstanding or to
ensure that the Issuer Trust will not be required to register as an
"investment company" under the Investment Company Act, and any such amendments
of such Trust Agreement will become effective when notice of such amendment is
given to the holders of Trust Securities. Each Trust Agreement may be amended
by the holders of a majority in aggregate Liquidation Amount of the Common
Securities and the Property Trustee with (i) the consent of holders
representing not less than a majority in aggregate Liquidation Amount of the
outstanding Capital Securities and (ii) receipt by the Issuer Trustees of an
opinion of counsel to the effect that such amendment or the exercise of any
power granted to the Issuer Trustees in accordance with such amendment will
not cause the Issuer Trust to be taxable as a corporation for United States
federal income tax purposes or affect the Issuer Trust's exemption from status
as an "investment company" under the Investment Company Act, except that,
without the consent of each holder of Trust Securities affected thereby, a
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such
date.
So long as any Debt Securities are held by an Issuer Trust, the Property
Trustee will not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debt Securities Trustee, or execute
any trust or power conferred on the Property Trustee with respect to the Debt
Securities, (ii) waive any past default that may be waived under Section 5.10
of such applicable Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal amount of such Debt Securities shall be due and
payable or (iv) consent to any amendment, modification or termination of such
Indenture or Debt Securities, where such consent shall be required, without,
in each case, obtaining the prior approval of the holders of at least a
majority in aggregate Liquidation Amount of the outstanding Capital
Securities, except that, if a consent under such Indenture would require the
consent of each holder of such Debt Securities affected thereby, no such
consent will be given by the Property Trustee without the prior consent of
each holder of such Capital Securities. The Property Trustee may not revoke
any action previously authorized or approved by a vote of the holders of such
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Capital Securities except by subsequent vote of the holders of Capital
Securities issued by such Issuer Trust. The Property Trustee will notify each
holder of such Capital Securities of any notice of default with respect to
such Debt Securities. In addition to obtaining the foregoing approvals of the
holders of such Capital Securities, before taking any of the foregoing
actions, the Property Trustee will obtain an opinion of counsel experienced in
such matters to the effect that the Issuer Trust will not be taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each registered holder of Capital Securities in the manner set forth
in each Trust Agreement.
No vote or consent of the holders of Capital Securities will be required to
redeem and cancel Capital Securities in accordance with the applicable Trust
Agreement.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
EXPENSES AND TAXES
In connection with the Debt Securities owned by an Issuer Trust, the
Company, as borrower, will agree to pay all debts and other obligations (other
than with respect to the Capital Securities issued by such Issuer Trust) and
all costs and expenses of such Issuer Trust (including costs and expenses
relating to the organization of such Issuer Trust, the fees and expenses of
the Issuer Trustees for such Issuer Trust and the costs and expenses relating
to the operation of such Issuer Trust) and to pay any and all taxes and all
costs and expenses with respect thereto (other than United States withholding
taxes) to which such Issuer Trust might become subject. The foregoing
obligations of the Company under the Debt Securities owned by an Issuer Trust
are for the benefit of, and shall be enforceable by, any person to whom any
such debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice thereof. Any such Creditor
may enforce such obligations of the Company directly against the Company, and
the Company will irrevocably waive any right or remedy to require that any
such Creditor take any action against such Issuer Trust or any other person
before proceeding against the Company. The Company will also agree in the Debt
Securities owned by an Issuer Trust to execute such additional agreements as
may be necessary or desirable to give full effect to the foregoing.
PAYMENT AND PAYING AGENCY
The applicable Prospectus Supplement will specify the manner in which
payments in respect of the Capital Securities will be made. The paying agent
(the "Paying Agent") for Capital Securities will initially be the Property
Trustee and any copaying agent chosen by the Property Trustee and acceptable
to the Administrators. The Paying Agent will be permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee and the
Administrators. If the Property Trustee is no longer the Paying Agent, the
Property Trustee will appoint a successor (which must be a bank or trust
company reasonably acceptable to the Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Capital
Securities.
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of each Issuer Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any
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transfer or exchange. The Issuer Trusts will not be required to register or
cause to be registered the transfer of their Capital Securities after such
Capital Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of a
Capital Securities Event of Default, undertakes to perform only such duties as
are specifically set forth in each Trust Agreement and, after such Capital
Securities Event of Default, must exercise the same degree of care and skill
as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the applicable Trust
Agreement at the request of any holder of Capital Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
For information concerning the relationship between the Property Trustee and
the Company, see "Description of Debt Securities--Concerning the Trustee."
MISCELLANEOUS
The Administrators and the Property Trustee are authorized and directed to
conduct the affairs of and to operate the Issuer Trusts in such a way that the
Issuer Trusts will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxable as a corporation for
United States federal income tax purposes and so that the Debt Securities
owned by the Issuer Trusts will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Property
Trustee and the holders of Common Securities are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of each
Issuer Trust or each Trust Agreement, that the Property Trustee and the
holders of Common Securities determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the related Capital
Securities.
Holders of the Capital Securities have no preemptive or similar rights.
The Issuer Trusts may not borrow money or issue debt or mortgage or pledge
any of their assets.
GOVERNING LAW
Each Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
GLOBAL SECURITIES
The registered Debt Securities and Capital Securities of any series may be
issued in the form of one or more fully registered global Securities (a
"Registered Global Security") that will be deposited with a depository (a
"Depository") or with a nominee for a Depository identified in the Prospectus
Supplement relating to such series and registered in the name of such
Depository or nominee thereof. In such case, one or more Registered Global
Securities will be issued in a denomination or aggregate denominations equal
to the portion of the aggregate principal or face amount of outstanding
registered Securities of the series to be represented by such Registered
Global Securities. Unless and until it is exchanged in whole for Securities in
definitive registered form, a Registered Global Security may not be
transferred except as a whole by the Depository for such Registered Global
Security to a nominee of such Depository or by a nominee of such Depository to
such Depository or another nominee of such Depository or by such Depository or
any such nominee to a successor of such Depository or a nominee of such
successor.
The specific terms of the depository arrangement with respect to any portion
of a series of Securities to be represented by a Registered Global Security
will be described in the Prospectus Supplement relating to such series. The
Company anticipates that the following provisions will apply to all depository
arrangements.
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Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depository for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the
Depository for such Registered Global Security will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal or face amounts of the Securities represented by such
Registered Global Security beneficially owned by such participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of such Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through,
records maintained by the Depository for such Registered Global Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in
Registered Global Securities.
So long as the Depository for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depository or
such nominee, as the case may be, will be considered the sole owner or holder
of the Securities represented by such Registered Global Security for all
purposes under the applicable Indenture or Trust Agreement. Except as set
forth below, owners of beneficial interests in a Registered Global Security
will not be entitled to have the Securities represented by such Registered
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of such Securities in definitive form and will not
be considered the owners or holders thereof under the applicable Indenture or
Trust Agreement. Accordingly, each person owning a beneficial interest in a
Registered Global Security must rely on the procedures of the Depository for
such Registered Global Security and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the applicable Indenture or Trust
Agreement. The Company understands that under existing industry practices, if
it requests any action of holders or if an owner of a beneficial interest in a
Registered Global Security desires to give or take any action which a holder
is entitled to give or take under the applicable Indenture or Trust Agreement,
the Depository for such Registered Global Security would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Principal, premium, if any, and interest payments on Debt Securities, and
any payments to holders with respect to Capital Securities, represented by a
Registered Global Security registered in the name of a Depository or its
nominee will be made to such Depository or its nominee, as the case may be, as
the registered owner of such Registered Global Security. None of the Company,
the Debt Securities Trustees, the Issuer Trustees or any other agent of the
Company, agent of the applicable Issuer Trust or agent of any such Trustees,
as the case may be, will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
The Company and the Issuer Trusts expect that the Depository for any
Securities represented by a Registered Global Security, upon receipt of any
payment of principal, premium, interest or other distribution of underlying
securities to holders in respect of such Registered Global Security, will
immediately credit participants' accounts in amounts proportionate to their
respective beneficial interests in such Registered Global Security as shown on
the records of such Depository. The Company and the Issuer Trusts also expect
that payments by participants to owners of beneficial interests in such
Registered Global Security held through such participants will be governed by
standing customer instructions and customary practices, as is now the case
with the securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
participants.
If the Depository for any Securities represented by a Registered Global
Security is at any time unwilling or unable to continue as Depository or
ceases to be a clearing agency registered under the Exchange Act, and a
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successor Depository registered as a clearing agency under the Exchange Act is
not appointed by the Company or the applicable Issuer Trust, as the case may
be, within 90 days, the Company or the applicable Issuer Trust, as the case
may be, will issue such Securities in definitive form in exchange for such
Registered Global Security. In addition, the Company or the applicable Issuer
Trust, as the case may be, may at any time and in its sole discretion
determine not to have any of the Securities of a series represented by one or
more Registered Global Securities and, in such event, will issue Securities of
such series in definitive form in exchange for all of the Registered Global
Security or Securities representing such Securities. Any Securities issued in
definitive form in exchange for a Registered Global Security will be
registered in such name or names as the Depository shall instruct the relevant
Trustee or other relevant agent of the Company, the applicable Issuer Trust or
such Trustee. It is expected that such instructions will be based upon
directions received by the Depository from participants with respect to
ownership of beneficial interests in such Registered Global Security.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Company concurrently with
the issuance by each Issuer Trust of its Capital Securities for the benefit of
the holders from time to time of such Capital Securities. This summary of
certain provisions of the Guarantees does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of each Guarantee, including the definitions therein of certain terms. A copy
of the form of the Guarantee is available upon request from the Guarantee
Trustee. The Guarantee Trustee will hold each Guarantee for the benefit of the
holders of the related Issuer Trust's Capital Securities.
GENERAL
Pursuant to a Guarantee, the Company will irrevocably and unconditionally
agree to pay in full, to the extent set forth therein, the Guarantee Payments
(as defined below) to the holders of the Capital Securities covered by such
Guarantee, as and when due, regardless of any defense, right of setoff or
counterclaim that the Issuer Trust that issued such Capital Securities may
have or assert other than the defense of payment. The following payments with
respect to Capital Securities, to the extent not paid by or on behalf of the
Issuer Trust that issued such Capital Securities (the "Guarantee Payments"),
will be subject to the Guarantee thereon: (i) any accumulated and unpaid
Distributions required to be paid on such Capital Securities, to the extent
that such Issuer Trust has funds on hand available therefor at such time, if
any, (ii) the redemption price with respect to any Capital Securities called
for redemption, including all accumulated and unpaid Distributions thereon
(the "Redemption Price"), to the extent that such Issuer Trust has funds on
hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, windingup or liquidation of such Issuer Trust (unless
the Debt Securities owned by such Issuer Trust are distributed to holders of
such Capital Securities in accordance with the terms thereof), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, and (b) the amount of assets of such
Issuer Trust remaining available for distribution to holders of Capital
Securities on liquidation of such Issuer Trust. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the Capital Securities or by causing
the applicable Issuer Trust to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee of the related Issuer
Trust's obligations under the Capital Securities covered thereby, but will
apply only to the extent that such Issuer Trust has funds sufficient to make
such payments, and is not a guarantee of collection.
If the Company does not make payments on the Debt Securities owned by an
Issuer Trust, such Issuer Trust will not be able to pay any amounts payable in
respect of its Capital Securities and will not have funds legally available
therefor and, in such event, holders of the Capital Securities would not be
able to rely upon the Guarantee for payment of such amounts. Each Guarantee
will have the same ranking as the Debt Securities owned by the Issuer Trust
that issues the Capital Securities covered thereby. See "--Status of the
Guarantees." No Guarantee will limit the incurrence or issuance of other
secured or unsecured debt of the Company.
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<PAGE>
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company and
will rank pari passu in right of payment with the Debt Securities owned by the
Issuer Trust that issues the Capital Securities covered thereby.
Each Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the related Capital Securities. Each Guarantee will not be discharged
except by payment of the Guarantee Payments in full to the extent not paid by
the Issuer Trust or, if applicable, distribution to the holders of the Capital
Securities of the Debt Securities owned by such Issuer Trust.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Capital Securities issued by an Issuer Trust (in
which case no vote will be required), the Guarantee that covers such Capital
Securities may not be amended without the prior approval of the holders of not
less than a majority of the aggregate Liquidation Amount of such Capital
Securities outstanding. The manner of obtaining any such approval will be as
set forth under "Description of the Capital Securities--Voting Rights;
Amendment of Trust Agreements" and in the applicable Prospectus Supplement.
All guarantees and agreements contained in each Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the covered Capital
Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Company to perform any of its payment obligations thereunder, or to perform
any nonpayment obligation if such nonpayment default remains unremedied for 30
days. The holders of not less than a majority in aggregate Liquidation Amount
of the outstanding Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of such Guarantee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under such Guarantee.
Any registered holder of Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee thereon
without first instituting a legal proceeding against the Issuer Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantees.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in the performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after the occurrence of an event of default with respect to the Guarantee,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by any Guarantee at the request of any holder of the
Capital Securities covered thereby unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
For information concerning the relationship between the Guarantee Trustee
and the Company, see "Description of Debt Securities--Concerning the Trustee."
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TERMINATION OF THE GUARANTEE
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Capital Securities covered
thereby, upon full payment of the amounts payable with respect to such Capital
Securities upon liquidation of the related Issuer Trust or upon distribution
of the Debt Securities owned by such Issuer Trust to the holders of such
Capital Securities. Each Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of such Capital
Securities must repay any sums with respect to such Capital Securities or such
Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities and Equity Securities and an Issuer
Trust may sell the Capital Securities being offered hereby in three ways: (i)
through agents, (ii) through underwriters and (iii) through dealers.
Offers to purchase Securities may be solicited by agents designated by the
Company and/or an Issuer Trust, as the case may be, from time to time. Any
such agent, who may be deemed to be an underwriter as that term is defined in
the Securities Act, involved in the offer or sale of the Securities in respect
of which this Prospectus is delivered will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement. Any such agent will be acting on a reasonable efforts basis for
the period of its appointment or, if indicated in the applicable Prospectus
Supplement, on a firm commitment basis.
If any underwriters are utilized in the sale of the Securities in respect of
which this Prospectus is delivered, the Company and/or an Issuer Trust, as the
case may be, will enter into an underwriting agreement with such underwriters
at the time of the sale to them and the names of the underwriters and the
terms of the transaction will be set forth in the Prospectus Supplement, which
will be used by the underwriters to make resales of the Securities in respect
of which this Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Securities in respect of which
the Prospectus is delivered, the Company and/or an Issuer Trust, as the case
may be, will sell such Securities to the dealer, as principal. The dealer may
then resell such Securities to the public at varying prices to be determined
by such dealer at the time of resale.
In order to facilitate the offering of the Securities, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Securities or any other securities the prices of which may be used to
determine payments on such Securities. Specifically, the underwriters may
overallot in connection with the offering, creating a short position in the
Securities for their own accounts. In addition, to cover overallotments or to
stabilize the price of the Securities or of any such other securities, the
underwriters may bid for, and purchase, the Securities or any such other
securities in the open market. Finally, in any offering of the Securities
through a syndicate of underwriters, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Securities in the offering if the syndicate repurchases previously distributed
Securities in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Securities above independent market
levels. The underwriters are not required to engage in these activities, and
may end any of these activities at any time.
If so indicated in the Prospectus Supplement, the Company and/or an Issuer
Trust, as the case may be, will authorize agents, underwriters or dealers to
solicit offers by certain purchasers to purchase Securities from the Company
at the public offering price set forth in the Prospectus Supplement pursuant
to delayed delivery contracts providing for payment and delivery on a
specified date in the future. Such contracts will be subject to
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only those conditions set forth in the Prospectus Supplement, and the
Prospectus Supplement will set forth the commission payable for solicitation
of such offers.
Any underwriter, agent or dealer utilized in the initial offering of
Securities will not confirm sales to accounts over which it exercises
discretionary authority without the prior specific written approval of its
customer.
VALIDITY OF SECURITIES
The validity of the Capital Securities will be passed on for the Issuer
Trusts by Richards, Layton & Finger, P.A. The validity of the Equity
Securities, the Debt Securities and the Guarantees will be passed upon for the
Company by Friday, Eldredge & Clark, Little Rock, Arkansas. Certain legal
matters relating to the Securities will be passed upon for the Underwriters by
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017.
William H. Sutton and Paul B. Benham III, partners in Friday, Eldredge &
Clark, beneficially own 4,000 and 2,000 shares, respectively, of the Company's
Class A Common Stock either directly or indirectly through segregated accounts
in a retirement plan maintained by the law firm. Additionally, Mr. Sutton is a
director of the Company. Simpson Thacher & Bartlett from time to time acts as
counsel in various matters for the Company.
EXPERTS
The consolidated financial statements incorporated by reference in this
prospectus and the related financial statement schedules incorporated by
reference in this registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports incorporated by
reference in this registration statement (which express an unqualified opinion
and include an explanatory paragraph relating to a change in accounting for
the impairment of long-lived assets and for long-lived assets to be disposed
of), and have been so included in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Mercantile Stores Company, Inc.
which are incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely
on any unauthorized information or representations. This prospectus is an of-
fer to sell only the Notes offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Use of Proceeds............................................................. S-2
Ratio of Earnings to Fixed Charges.......................................... S-2
Description of the Notes.................................................... S-2
Underwriting................................................................ S-4
Prospectus
Available Information....................................................... 3
Incorporation of Certain Documents by Reference............................. 3
Disclosures Regarding Forward-Looking Statements............................ 4
The Company................................................................. 5
Recent Development.......................................................... 5
The Issuer Trusts........................................................... 6
Use of Proceeds............................................................. 7
Ratios of Earnings to Fixed Charges......................................... 7
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends... 7
Description of Debt Securities.............................................. 7
Description of Capital Stock................................................ 15
Description of Capital Securities........................................... 17
Global Securities........................................................... 23
Description of Guarantees................................................... 25
Plan of Distribution........................................................ 27
Validity of Securities...................................................... 28
Experts..................................................................... 28
</TABLE>
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$150,000,000
DILLARD'S, INC.
5.790% Notes due November 15, 2001
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
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